Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike take a number of listener questions including talking about making your first $2k from products, whether to look for a Co-Founder, and rehabbing an existing product.
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Transcript
Rob [00:29]: In this episode of Startups For the Rest of Us, Mike and I talk about making your first $2,000 from products, whether to look for a co-founder, re-habing an existing product, and more listener questions. This is Startups For the Rest of Us, episode 259.
Welcome to Startups For the Rest of Us, the podcast helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:30]: And I’m Mike.
Rob [00:34]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:39]: Well, tomorrow at precisely 4:29 p.m., Marty McFly arrives from the past.
Rob [00:46]: Very nice. I’ve heard a lot of folks talking about it, and then asking where the hoverboards and the nuclear fusion thing that straps to your car.
Mike [00:47]: And the fax machines, you know, don’t forget those.
Rob [00:49]: Indeed. What else is going on?
Mike [01:40]: So I spent the past couple of weeks doing, essentially market validation for a couple of the different ideas that I’ve had, and I’ve been focusing really in on the one-to-one email sequences. And so far I’ve had 23 conversations with people, and of those 23 conversations 11 people have said that they would pay me for it. So I’m still trying to work things out because from one person to the next there seems to be a lot of variation between the specifics of what they are looking for and the problem that they’re trying to solve. They’re all very, very similar, but trying to nail down exactly what would work for the vast majority of them is, kind of, the hard part. I’m figuring out where that is and where I can get the most traction, I guess that’s the challenging part right now. And people are using different terminology for the same types of things, too. So that makes it even harder.
Rob [02:15]: For sure. For sure. And that’s the hard part about customer development is that you’re either going to get 20 different opinions, or you’re going to get several opinions that are the same but you don’t realize they’re the same because they’re using different vocabulary. And it’s hard if something doesn’t exist and you can’t just show it to them to figure out if it’s actually A, going to do what they want, or B- the little subtleties with email. It could be cold email, it could be warm email, it could be bulk email. There’s so many things. So until you can figure out which stage they’re using it at and how much value it has to them. Like, have you talked price point at all?
Mike [02:19]: I have. I’ve talked price point with virtually every single one of them.
Rob [02:19]: Good.
Mike [02:38]: So I have a ballpark idea so far of where the MRR would come from if they were all to sign up today. But I’m at the process where I’m still just gathering information right now, and then once I have a better idea of what it is that the solution would look like, then I’m basically going to draw up the designs, go back to every single one of them and say, “Can I get a pre-order for this?”
Rob [02:45]: Mm-hmm. You said you have 11 commitments, how many are you going for before you start moving forward?
Mike [03:12]: I want to be able to get to the point where I have at least 10 who are willing to move forward on that commitment. So it’s kind of nebulous as to how many I have to get to. Is it 15, is it 20, is it 25. It really depends on one, how far I want to take it, how much variation I see between people. If I think I have something that is going to fit for at least 12 to 15 people, then I’ll probably start moving forward. But, again, like I said, some of them are all over the map, so it’s still up in the air right now.
Rob [04:21]: For sure. Well while you’re in the process of adding to your product portfolio, I’ve actually been in the process of paring mine down so that I can focus on, essentially, on Drip and MicroConf and the podcast, and my blog and the other stuff. But really have been either selling or I’ve actually given, DotNetInvoice to my business partner. And HitTail is up for sale right now through Thomas Smale at FE International. If someone is interested it is still on the market. So it feels good to be able to focus more on the things that are really working. Double and triple down on Drip in essence, because that is where I’ve been spending the bulk of my time, and it’s where I think it should be spent for the next “until it’s done”, is what it is. And if that’s five years or ten years, that’s where I’m at. I’m not in the mode anymore of the “starting the next one after one to two years”, which I was for a while, and building up the portfolio. I think I’m ready to head in the opposite direction and really build this one up. There’s just a lot more opportunity and a lot more growth going on than anything I’ve done in the past. So I’m doubling down on that.
Mike [04:30]: Do you think that’s a byproduct of the type of product this is in relation to some of the previous ones, or is it more of a career trajectory sort of thing?
Rob [05:05]: Yeah, you know that’s a good question to ask. I think it’s partly both. Certainly, I’m at the point in my career where I do want to focus on some things that I really enjoy, and I kind of want to take things to the next level because it allows me to learn and that’s when I’m happy. That’s one of my definitions of success is learning a lot of stuff and being in control of what I’m working on. But I also think that if you look at Drip, and you look at how large the market is, and if you look at the opportunity here and the price point, the average MRR per customer. Just all these things are completely different than everything I’ve done in the past. So I think it’s some of both, to answer your question.
Mike [05:06]: So what are we talking about this week?
Rob [06:16]: We have a slew of listener questions. We’re actually backlogged. Some of these are from almost a year ago. And apologies to folks who sent them in and haven’t had us answer them yet. But we still want to answer ones that are general enough that I think they’ll apply to most folks listening. Our first question is from Daniel McCraty and it’s actually not a question. It was just an email to say thank you. He says, “Hi Mike and Rob. I really wanted to say thank you. I’m a long time listener who’s starting to see some success from your advice. As a full-time developer and now a technical lead, I don’t get a lot of experience with marketing in my day-to-day job. Listening to your podcast has helped fill in some gaps and kept me from going down the wrong path. I’ve created a minimal product and nice clean landing page that people actually purchase my product from, and I’m getting great feedback on feature enhancements that the customers want. I know I have a lot of work to do but 20 sales in the first two months is a success in my book.” And his subject line was “I made $2,000 in the first two months.” Yeah, thanks a lot for writing in, Daniel. His app, if you want to take a look at it is at Woo Ticket Studio, that’s W-O-O, ticketstudio.com if you’re interested in checking it out. And thanks, as always, for writing in with success stories. We love to hear from folks who have been long time listeners and have implemented what we said, whether to launch product, make the first couple thousand online or to quit your job.
Mike [06:17]: Yeah, great job, Dan.
Rob [06:37]: All right. Now let’s queue us up for our first question. So this is from Justin McGill and he sent it over a year ago. Sorry about that Justin. But he asked us “What do your daily and weekly schedules look like? Rob with his multiple projects and Mike with whatever he’s working on at the time. I think both perspectives would be helpful.” Why don’t you kick us off, Mike.
Mike [07:42]: I guess, in terms of my daily schedule, I try to get up before eight o’clock, and there are definitely days where that just simply does not happen. A lot of times, my schedule for the day tends to be dictated by how late I worked the previous day. So if I were working until five or six and then spent time with the family, and then if I decide for whatever reason to go back and sit on my computer and do some work or fool around or anything, there are definitely times where I stayed up until 12, one o’clock in the morning. And that will have a severely negative impact on my following day. So I try to avoid it as much as I can, but it does still creep in there one and a while. And then for the rest of the time, I try to stick to a schedule where roughly from eight to five I’m working, and then after that lately it’s been up until about three to four o’clock, where after that it’s been difficult to get things done, just because my office has now moved upstairs. So the kids get home at three, so there’s definitely a lot more pressure to get everything done by three o’clock or four o’clock because the kids will start to interrupt. So that’s generally what my schedule looks like. I try to avoid working on Saturdays or Sundays, just kind of out of matter of principle. What about you?
Rob [09:56]: I think I’m pretty similar to you. My schedule used to be very different. Obviously it was all nights and weekends for a long time, for the first several years, because I was typically doing salary work, or in the later days, consulting, you know, in 2000, let’s say, 5, 6, and 7. I was doing 30, 40 hours a week consulting during the day, and then working on products on the side. And then I hit a certain point where I just decided I really didn’t want to do that anymore. I didn’t want to do the night and weekend stuff. And so I will do some work in the evenings, sometimes. And especially if Sherry’s out with the kids and I’m home alone, unfortunately, I will tend to veer by the computer and either do email or work on something that needs to get done. I’ve been trying lately to not do that, because I find that if I work too much, I just become not productive. Your work expands to fill whatever time you give it. And so I’ve really been trying to avoid that. I listen to a lot of audio books, I read a lot. I listen to a lot of podcasts and I do find myself thinking about work, jotting notes down, doing a lot of strategy type stuff in the evening if I have free time, or on the weekends if I’m out and about running errands or just doing stuff around the property. I wind up coming up with a lot of, what I think, are my best ideas when I’m not sitting behind my desk – because that’s when you’re actually getting work done – but I’m out and about, I’m doing stuff. So I wouldn’t say I work on the weekends or the evenings, but I do get kind of strategic thinking done. In terms of the daytime, I’m up by 7 a.m.. I make breakfast for the family and then take the kids to school, one or both of them. And then I head into the office two days a week, three days a week, it depends. And work from around 8:30 until whenever it’s done, which is between 3 and 5 depending on the day. And so if I don’t get a full workday in during that time I will add a little time in the evening or on a weekend to make up for it for sure.
Our next question is about entering a competitive SaaS market. And it’s from Scott Underwood and he said, “Here are some podcast ideas for you.” He says, “Do you have any thoughts or tips on entering a SaaS market with large competitors?” Meaning you take someone else’s SaaS app or niche and you innovate on it?”
Mike [11:32]: I think there’s some interesting opportunities in going into these types of markets because you can essentially build, not necessarily features, but add-ons or plug-ins for other vendors and essentially build on top of their platform or on top of their application. And there’s lots of people who’ve done this very successfully. I think the one thing you have to really be careful of is, I think, what Joel Spolsky at one point called “snatching nickels from a steamroller.” And his reference point was the fact that people were building a lot of copy-paste applications back when iOS was first released and it didn’t support copy-paste. And then all it takes for that entire business to go away is for them to implement that one feature. So there’s got to be a compelling reason for them to not do it. And if it’s a feature that is compelling enough for them to implement, you have to be careful just because they will eventually kill your business. So if you’re bolting something onto those larger applications, you do have to be a little bit careful of that. The other thing I’d say is if you’re taking a much larger application and just taking off a tiny little slice of it, you could probably do a much better job then they are. But you also have to find people who are willing to pay for just that tiny slice of the solution as opposed to the entire thing. So those are the caveats around it, I think. In terms of my general thoughts on it, I don’t think there’s anything inherently wrong with it, but you do have to pick and choose which of these battles you fight, because some of them are going to be worth it, some of them aren’t. And there’s going to be some where that larger competitor comes in and essentially, squishes you just because they come in and they have the resources to bare on a problem, and if it’s important enough to them and to their customers, they’re going to do it.
Rob [12:14]: So you were taking that from the angle of building like add-ons for larger products or in their ecosystem. I would look at this, I mean he’s asking more about how to take on a larger competitor. Yeah, obviously marketing automation would be an example. I’m not building add-ons for HubSpot or Infusionsoft or one of those guys, but we are taking them on kind of directly as a one-on-one competitor. So actually I do have a lot of thoughts on this. I got an interesting email. It was probably about a year and a half ago, from Drew Sinaki, a long time listener of the show. And he asked are you trying to do an innovators dilemma to Infusionsoft? And I thought that was a really interesting way to put it. Have you read that book?
Mike [12:15]: Yes, I have.
Rob [14:13]: So the “innovators dilemma” is where you’re a big company in a market that’s existed for ten or 20 years and the market’s starting to shift and there’s a lower cost or an easier solution that’s coming in front of you, but you won’t cannibalize your business in order to take advantage of that new market opportunity. And so IBM has seen this, Microsoft is seeing this. It happens with a lot of larger technology companies, in general, as the technology changes. And I thought it was a really interesting way Drew put that in the email. It got me thinking. I actually went back and listened to the book again. I hadn’t listened to it in a few years. And I think that that’s the tactic that you need to take if you’re going to go after. Or I think it’s probably the optimal tactic. There’s probably many that you can do, but that’s the approach that I would look at doing is to basically [couch?] yourself as the opposite of whatever they are. So if they are big and cumbersome and clumsy and they don’t have a lot of features and they’re expensive, well, start off as being the opposite of all that. And you can be pretty intentional about marketing yourself as that. If you go to the Drip homepage, there’s a couple thousand words on that page that really are positioning us as the opposite of the larger players. And after that, it’s execution, right? I mean you actually have to really build a better app. You can’t just build a clunky app and expect that since you have fewer features you’re going to be easier to use, because that’s not the case. So you need to focus a lot on usability and really double down on your differences and also try not to get the feature bloat that a lot of these larger apps have. So you can’t build everything that everyone’s asking for. So those would be my thoughts about kind of early advantages when heading into a market with heavy competition.
The other question Scott had for us, he said, “Do you have any data or lessons learned from Drip for the most effective opt-ins for building an email list? I know you don’t like the exit pop-up forms but I’ve seen several people tweeting how effective they are.” He’s talking like a bounce exchange exit intent pop-up. Do you have thoughts on those? Do you use one of those?
Mike [15:28]: I have tested them. I’d have to go back and look. I think that I might actually have it on my blog. I don’t remember if I ever went back and either disabled that or changed it. But I do remember testing it. And now that you bring it up, I don’t remember if I ever actually went back and looked at the results of that test, because I probably got distracted so that’s totally on me. I’ve heard similar things like people have said over and over and over again that the exit intent pop-ups convert better. Now I think the one point of caution I would say is they get you more email addresses, they don’t necessarily convert to sales any better. They may, they may not. I think that it depends on what your industry is. But at the same time if you don’t get an email address then you have no opportunity to sell to them. So in a way it makes more sense to get as many email addresses as you possibly can. There are, I’ll say, certain people, myself included, who kind of feel like, “Well I don’t want to be too intrusive about it.” But at the same time, if you’re offering a product of a solution that is extremely helpful to that audience, then it’s kind of an obligation to get in front of those types of people in any way, shape or form because you can give them a lot of value. So there’s different schools of thought on that. I’m kind of in the middle. I think that it really depends on what type of product that you’re selling as to whether or not I’d do it.
Rob [18:00]: Yeah, I have a personal take. I don’t like them as a user, and so I won’t put them on my sites because I find them irritating and I have heard that, like you said, you get more emails, but I use the justification of they’re probably not going to convert as well because you kind of forced people into it. I haven’t tested it. It’s just one of the things that I’m not willing to do. I think when I was back in the day, reading a bunch of Dan Kennedy stuff about copywriting, he’s a very good copywriter, I adopted the things that I was willing to ethically take on and the purchases I was willing to do and feel good about myself. I never say something in a sales letter or on a marketing website that I wouldn’t say face-to-face to someone at a conference or at a cocktail party, frankly. And that’s just a personal thing so that everyday I wake up and I feel good about myself, and I can tell my kids and my wife that this is stuff that I’m- I’m really proud of what I do and the value I give back. Now in theory, are you leaving, perhaps, something on the table by not using one of these exit intents, or by not using a more aggressive form of marketing? Yeah, in theory, sure. Is that extra five percent or ten percent or 20 percent over the course of your life, is it going to make a huge difference if you feel like you are sacrificing something internally? Whether you call it like a moral code or just something that you’re not comfortable with, that you don’t feel good about. It’s your choice. Different people have different lines. I think there’s a lot of things in business like that, right? There are some absolute lines of legality and illegality, and then a lot of things that have gray areas. And I feel like this is one of them. So certain people shout from the rooftops that exit intent is the way to go. And obviously they feel comfortable with it. Now when I visit their sites and I get irritated by it, I’m much, much less likely to go back to their site. And I also have never, I don’t think ever in my life, entered my email address into an exit intent pop-up. And I typically make a note like, “All right, this is definitely a site that I’m not in love with.” I don’t feel like they treat me with respect when they use it. I feel like they’re interrupting my flow and they’re bothering my flow of web surfing and consuming content on the Internet. But maybe the site owner doesn’t feel like that. And to kind of wrap it up, for a long time we didn’t build an exit intent pop-up, or exit triggered pop-up, in Drip. But we found that in certain industries and certain niches and just based on different marketers, certain people like them, and they work for them. And so I realize that applying that piece of judgment on exit triggered stuff wasn’t necessarily the way to go. And so we do offer it as a service if you enable it in Drip, but it’s not something I would personally use myself.
Mike [18:31]: Yeah, I went back and just double checked while you were talking. I disabled it. I don’t recall whether or not I looked over the details of what it was, but I definitely tried it out. I don’t think that there was a massive increase for me. It just didn’t seem worth it for wrecking the user experience, as you said. Because I’m kind of in the same camp as you, like when I start seeing those exit pop-ups, I just close the browser or if it’s an article I really want to read then I’ll read it or click by it. But if I have to enter an email address to read, out of principle, I just won’t.
Rob [20:32]: Yeah, and there may come a time when it’s the norm and you have to deal with it. There may be a backlash at some point. I mean ad blockers are coming up because of this type of thing. Because of the more aggressive advertising and these marketing approaches, ad blockers are being used by more and more people. And I think that’s kind of a shame, frankly. I think that if we were able to all agree on a decent level of advertising and marketing, I think that the Internet becomes a better place, and I think people don’t necessarily use that kind of stuff. I’ve been trying to go to just some basic news websites. Drip got written up on the Huffington Post yesterday. And just surfing around that site, it’s like there’s so much stuff. The site is slow. There’s Javascript, there’s videos autoplaying in front of me. It was crazy. I really haven’t read news online in a long time, because I consume most of it via podcast, but I hadn’t realized the state that we’re in and now I realize why these pop-up blockers are becoming so prominent.
Our next question is from Richard Garside. And his question is on breathing life into an old product. He says, “I really love the show and I find it very interesting. I’m setting my goals for the next year and one thing I’m thinking about is whether or not to breathe life back into an old software product of mine called Font Picker, Thefonticker.net. I created it when I had some spare time and it did quite well. Since then I have not had as much free time and I’ve just left it for almost two years. Sales have slowed and they continue to do so. I think I could both improve the product and the marketing. I continue to get good feedback and feature requests from customers and the app has a really good ranking in the Mac app store. In some ways, this is kind of like buying an existing product that you think you can improve. I think you’ve covered everything I need in various shows, but how would you approach saving an existing product from a slow death and bringing it back to full glory? Some things I’m thinking about are : improving the user interface design, improving the website, adding more features and just improving my marketing ability. As a developer, I want to get stuck into new features but perhaps that’s not the most important thing. I’m also fighting the urge to rewrite it in Swift. Time is limited and I don’t have time to do everything I want to do. Thanks for the shows and everything.” What do you think?
Mike [21:23]: Well I think the first thing I would say is do not rewrite it. If you’re trying to breathe life into an old product, especially one that’s on the decline, then I don’t think that rewriting it is going to make any difference. Your customers are not going to care that it’s rewritten. Unless you’re looking for some wholesale, complete UI redesign, which I don’t think entails a complete rewrite in a different language, then that’s probably not the way to go. In terms of a lot of the things that you mentioned, improving the UI, improving the website, I’m not so sure about adding new features but definitely getting better at the marketing aspect of it. Obviously, those are all good things to pursue. But I think at the end of the day you also have to ask yourself is this something that you really want to do, because if it’s not something that you want to do then you’re basically either going to half-ass it or just not be committed to it. And at that point the product itself is going to suffer.
Rob [25:21]: Yeah, I’d agree with Mike. I would not rewrite it yet. If you decide to get into it and it starts making quite a bit of money and you decide that it really is a hassle to add features, you could consider it at that point. But at this point, all you want to do it figure out, can you even rehab this thing? Can you get more sales out of it? Because if you can’t then none of the other stuff is worth doing. So the first thing I would look at is how are you going to drive more customers to it? That’s really what I would think. It’s like if you get a lot of your leads from the web, then I would probably redo your marketing website or at least improve the copy, make it look more modern. And if you have enough traffic to split test, that’s fine, but if not, just go with your gut on this and try to improve it there. Or if you get most of your customers from the Mac app store, then do some research on how to get your rankings up there. And if it’s releasing new features gets you mentioned or gets you reviewed or gets you whatever, then I’d do new features. But if not, then I would not be writing any code at this point. I would purely be looking at how to take the existing channels that are already driving customers, double down on those. How could you grow those by 50 percent, 100 percent, 200 percent, over the next three months without writing any code, right? Any production adjustments to the app. You can obviously write web code if you’re redoing the marketing side. So that’s the first thing I would do. Second thing I would think about is are there other marketing channels that you can start looking at? So with a small price point, obviously you’re not going to be able to do something like advertising, but if you’re not ranking well in Google, is there an SEO play here? If you’re not ranking well in the app store, obviously, that’s kind of a no-brainer to do it. Or there’s some JV partnerships where you could email your list and someone else emails their list. These are the types of things that I would start off right off the bat and attack. These are your early wins. It’s your low hanging fruit. Some of it’s not going to scale, but if it gets you a nice little bump in sales it all just aggregates and will build up over time. And then, if you’ve proven that you can grow this thing and it is doubled, tripled revenue, it’s making enough money to make it worthwhile, then you can think about, “I’m going to add a bunch of features,” and then you have something to talk about to your list. That’s the other thing I would do. I would definitely get – I don’t know if you’re already collecting email addresses – but build the list, right? Build the list on fontpicker.net for something really cool that folks would want to know about. They’re looking for font pickers then I’m assuming it’s a design audience so add a five day mini-course on how to pick the best font or how to have fonts interact with color, whatever it is. There’s certainly something off the top of your head that you’ll be able to do because that list will be huge for you. If you get a few thousand people on that, every time you release that new version you can email that list and get that bump in sales. But that’s probably where I would start. There’s obviously a lot to it.
Our next question is from Josh and he’s asking for some advice on either starting up a UX productized service, or buying an existing business. He says, “Hey guys. I love the show. Started dipping into old episodes and saving out things that you’ve talked about recently. Namely what to not focus so much on when you’re just starting out, etc. Here’s my dilemma. I used to run a UX consulting firm. It wasn’t scalable, and if I did it today I would do it way differently. I would offer it as a productized service to startups and small businesses. So I’m considering that as one route. Then I was listening to one of your episodes which mentioned buying existing business. I did some research and found that I would need around three times my salary to make this happen. This shouldn’t be an issue as I have some money saved up from investments that I can use and I can get 50 percent as a loan from the bank. So I’m debating either starting a UX productized service, or buying an existing company for cash flow and running both of them in tandem.” He has, “And/or, buying an existing company and running both in tandem. My question is, how do I structure this as a business? Right now I have a LLC and have it registered as doing Internet services. Would I be able to buy a company and roll it into the existing LLC or should I do another corporation?”
Wow, actually I don’t think that’s your question. I think your question is should you do the UX consulting thing or acquire a business. I obviously have a lot of thoughts but why don’t you kick us off, Mike.
Mike [26:12]: Yeah, I wouldn’t do both of them at the same time. I think the big red flag that pops out at me is buying something for three times your current salary when it seems to me like you’d also have to get a loan. I think that’s what he said, is that he’d also have to get a 50 percent loan from the bank. And that seems to me to be a huge chunk of money to go out and plunk down on something where typically the returns on those, you’re not going to get a full return on that for quite a while because you’re probably going to buy it for 3x the annual revenue or something along those lines. So I would have a really hard time going out and plunking down that kind of money for something that either I wasn’t necessarily passionate about, or didn’t necessarily know enough about. And I haven’t bought anything at that level. I think Rob, you, back in the day, you bought HitTail and that was for a good chunk of money, but at the same time it still had a lot of potential to it, I think.
Rob [26:14]: Yeah, it wasn’t nearly that amount.
Mike [26:43]: Yeah, so like the dollar amounts, I think, are significantly different. I wouldn’t personally feel comfortable dumping that much money into something if I wasn’t really, really sure. And for me to be really really sure, it would probably take a lot more than just a month or two or even six months of looking at the books and stuff. I’d want to be involved with the business before I bought it. I don’t have any good advice on that other than don’t do both at the same time. The other thing that does come to mind is look for something smaller to buy that you could run on the side.
Rob [26:43]: And grow it.
Mike [27:07]: Yeah, that seems to be like a better way to go because then you could at least learn, too. I think the last thing you want to do is essentially learn on a bigtime production app. I mean you’re basically saying, “I’m going to go play in the majors when you haven’t even really played around in the sandbox.” so to speak. It seems to me like a big risk. I wouldn’t be comfortable with it. Your mileage may vary on that one.
Rob [28:26]: Right, yeah, it’s funny. The corporate structure, I think, is certainly the least of your worries. I’ll talk a little bit about that in a second. I’ll cover it last because it’s the lowest priority. I wholeheartedly agree absolutely do not do both at once. Pick one and go all in on that thing and grow it and grow it as large as you can. And then either have an exit from that or use the cash flow to do your next thing. But I really, really would encourage you not to try to do both at once, to grow two things. It just does not work. In terms of acquiring, I agree, buying something for three times your salary, if you’re not already versed in marketing products, is quite a risk. I wouldn’t say never do it, but it’s a big risk. Probably bigger risk than I would be willing to take. It doesn’t feel like you’re stair-stepping up, you know. If you already had a few WordPress plugins or a small SaaS app and you were looking to buy something for $200,000 or $300,000, I’d say well you have the experience to do it. But just jumping up and trying to do that is really a big deal. I do know that in terms of, Mike you were concerned about the numbers not being valid or maybe the revenue not being there or whatever, I know that when the reputable brokers like FE International, they do a ton of vetting. So I think the odds are pretty good. Obviously it’s possible that there be an error and not have it actually be as successful as you want. But in my experience, the risk is going down now that these brokers are in here and actually doing a lot of vetting.
Mike [29:03]: Yeah, I don’t think it was the risk. For me I don’t think it’s the risk so much of like you getting ripped off or not a good valuation. But just the time that it would take to get a return on that, it seems to me like if you’re looking for something to just provide you with a stable income that you can grow incrementally over the next several years, great. But somebody got out of that business for a reason, and it may very well be that they took the business as far as they could and what guarantees do you have that you’re going to be able to do any better with it. And it’s not saying that you can’t. I’m just pointing out that there is an inherent risk that says that you can’t.
Rob [32:30]: But I think that’s kind of the entire opportunity of buying a business is that you may get someone who, like me is selling HitTail to focus on other things. I’ve seen HitTail do three or four times the revenue it’s doing right now. It was very successful, but I haven’t had time to focus on it. So the potential is there. I think you could also get someone selling- like a lot of the ones I’ve acquired where someone built it and it had a single traffic source and the developer didn’t know how to grow the thing. They didn’t know how to 5x it or 10x it. And that could be an opportunity. So I think that’s just part of the process of buying something based on an opportunity that you see. And so if you know how to do SEO or AdWords or content marketing or you have a skill that you can apply and you see that someone’s not doing any content marketing in a niche where it totally makes sense to do so, I think that’s an opportunity. That’s how I used to buy and grow things. But with that said, we don’t know Josh’s toolbelt. And so Josh, if you don’t have any marketing skills that are proven at this point that you’ve done really well in the past and had success with, then it is a bit of a risk. Now I will say that I’ve been surprised- you can actually take out an SBA loan, at least in the U.S., there’s a small business loan, and they just changed the rules in the past year to where you can now take it out to buy software products, or I’m assuming income generating online stuff. And the loan payment on a loan for, let’s say 200 or $250,000 is a lot less than the revenue, or even the net profit you’re going to make, from an app that costs that. So there is margin there. I don’t know if it’s enough to live on, but it’s an interesting approach. Personally I’m not the type to take out a loan to buy a business. It’s just not my style. I’m going to be more stair-stepping up to doing it. But if you’re all in and you need to go towards it right now, I do think it’s an interesting and/or creative way of doing it. The other approach I saw recently is someone actually raising a small seed round from friends, family and a couple more notable kind of adviser folks. Basically like a little angel round to go acquire a SaaS app that has a ton of potential. And I know about this because I talked to him as a potential investor. And it’s really interesting because the app already has product market fit, and with the team I think there’s a lot of potential there, and so it’s kind of a no brainer. Because getting to that point is always costly and takes a lot of time, but if you can buy something that already has it, I think you’re in a good boat.
I think to wrap it up, the product, as consulting, to be honest, is probably – I don’t know that I’d say your best bet – but I think it’s more of a sure thing. And I actually think that waiting around and trying to find something to buy, it could take a while. You can’t just make something appear in a niche that you want to be in. So if you’re in a hurry I’d probably do the productise. If you’re willing to wait around and take the risk, you could consider acquiring the app. The last piece of your question was, “How do I structure it as a business?” You said, “Would I be able to buy a company and roll it into the existing LLC?” Don’t buy the company. You don’t want to buy a company because a company comes with liabilities, meaning if someone did something, got sued later on for that time period, you now have taken that on because you own the company. All you want to do is buy the product, essentially the assets of the company. And so once you have a product you can of course roll that under an LLC or an existing corp structure. I am not a lawyer so you’ll want to consult one, but that is how I’ve seen it done many times here in the U.S..
Mike [32:51]: Thanks for the question, Josh. I think that about wraps us up for time today. If you have a question for us you can call it into our voicemail number at 1-888-801-9690. Or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot. Used under Creative Commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Big changes with you guys lately. Mike abandoning Audit Shark after working on it for 5 years. Rob selling off his non Drip SaaS’s. Reminds me of 37 signals concentrating on Basecamp and renaming their company to Basecamp. The advice here is work on whatever works well for you. There’s no formula. I buy into ‘Be your own Boss’ mantra. I have a relaxing day job as a senior software developer. I go to work whatever time I wake up. I have good relationships with my manager and others. I like the reliable pay and benefits. No need to worry about where to get my next customer from, marketing, competition, support, Google changing its search algorithms, blah blah. My commute is less than 10 minutes. Don’t even have enough commute time to go through my podcast backlog. My plan is have a stable easy day job and work sometimes in the weekends and evening on a commercial software. In my case without a deadline so it doesn’t get stressful and demanding.
As someone with a middle management job (which I systematized and delegated to be almost zero work), I agree with your sentiment to keep on a good, low-stress job as long as possible.
However, make sure to get started. There is a deadline, in that that stress-free job and life may not be around forever. Make the best out of this window of opportunity by doing something this weekend as the start of working on it every weekend, not “plan” to “sometimes” work in the weekends.
But it’s also easy to get burned out. He already has a day job. So it’s a balance between actually getting things done and making progress, and not wearing yourself out and getting burned out before you even have anything.
Thanks for your advice about my app Font Picker.
Don’t worry. I’m not going to rewrite in Swift. I know this would provide no business benefit. I would only do it as a learning experience, but I want to concentrate on the business side of things at the moment.
Most of my sales come directly from the OSX App Store. The website has roughly 4K visitors a month, but only 1% go to the app store to view the app.
I’ve found that sales can double in countries where I have more than 5 ratings in the app store for the current version.
In the app store you can only see ratings from people in the same country as you. If you have more than 5 (which must be for the current version) you get a visible rating on list pages which makes your app stand out from the crowd.
So, I’ve decided the best way to increase conversion in the app store is to encourage more people to rate my app. The most obvious way seems to be an in app pop up that targets heavy users and asks them to rate the app. I could also reach out to customers who have contacted me in the past and ask them to review, but I worry about this seeming pushy.
Next I’m sure I can improve on the 1% conversion rate of my website. Most of the traffic comes looking for a free online version of the app I wrote before releasing the pay version. The free version got a lot of link love and is mainly responsible for my good Google Ranking, but it looks pretty dated now. I’d like to update the look of the online version, but also try to make it better at driving visitors to the pay version.
You also suggested an email list. I did collect email addresses, but I never managed to collect a lot of them and I never sent out any emails. I really struggled with creating enough compelling content for emails. It felt like a bit of a chicken or egg problem. Why will people sign up if I have no compelling content, and why should I create compelling content when it’s only going to be read by a few people. Perhaps an email course is a good way to go, so the content gets reused.
Interesting to find out what your new ideas is of one to one email sequence…